Working Alliance

Peru last week suffered the standard South American ailments: a big deficit, a puff of inflation. Unions pressed for higher wages, and an executive of one of Peru's largest industries growled: "In six months we'll have some army officers walk into the presidential palace and take over."

But in the ornate palace he is occupying for a second term (his first: 1939-45), wispy, white-haired President Manuel Prado y Ugarteche, 69, told TIME Correspondent George de Carvalho in elegant French: "Be tranquil, mon cher. There will be no collapse." Quite possibly he was right. In a strange alliance, this dandified scion of the rich class that Peru calls "the oligarchs" has teamed up with Ramiro Priale, 55, the revolutionary who bosses Latin America's greatest mass political movement, the Apra, to put Peruvian democracy on a working, paying basis.

Manuel Prado, banker and boulevardier, swept back in 1956 from eight years of exile in Paris to begin the process of uniting his divided country. He accepted Apra support for the presidential election, in return legalized the party when he won. For this, the oligarchs labeled him a traitor to his class. Actually, the Prado-Apra alliance may avert the class struggle between the oligarchs and the Indian masses that historians (mindful of the Mexican revolution) predict. Apra turned right and met Prado going left.

Prado took over an economy that was (and is) basically strong and growing, if temporarily tormented. Its free-enterprising policies have brought $970 million in foreign capital, and between 1948 and 1957, gross national product almost doubled. At first Prado hiked wages and the budget too abruptly, and the U.S. recession dropped commodity prices: copper 44%, cotton 25%. The Peruvian sol dropped from 19 per $1 to 25. But Prado fell back on his banker's training, hiked customs as high as 200% on luxuries, clamped rigid reserve requirements on banks and stabilized the sol.

Prado cries: "I feel wonderful." One sign of his confidence: he bucked Peru's Roman Catholicism by pushing through an annulment of his 40-year marriage to a long-estranged first wife, then married Clorinda Malaga, 53, his great and good friend for 25 years. The danger of a military coup remains; the pro-oligarch army is uncomfortable in the new atmosphere, but otherwise Prado's course is paying off. He has repressed the Communists and helped nurture a middle class of 350,000 families that is moving into the middle ground between oligarchs and masses.

Apra too has caught the idea. Once it called for revolution, but Boss Priale now says: "That's not the way. A power plant, that's the real revolution. It means factories and payrolls. It gives the people light. It changes their lives. Everybody can work together on that--Apra, government, business, American capital."

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